B2B Wholesale & Distribution: Challenges and Triumphs of Industrial Wholesale Companies Facing Insolvency in Germany
Insolvency? A debtor that cannot pay its debts and liabilities to creditors. No cash, no business.
In Germany, specialist wholesalers and industrial distributors who can no longer meet their payment obligations due to current or foreseeable overindebtedness must, by law, file for insolvency protection. Forget your revenue, your brand, your years in the market. If you will not be able to meet your obligations, insolvency is cast.
The Statistisches Bundesamt counted 34,000 fewer wholesalers in the past ten years. Additionally, we’re seeing an increase in insolvencies in Germany’s industrial wholesale and retail segment, with several high-profile companies filing for bankruptcy. It’s essential to understand the significance of this trend and take necessary actions to address the issue.
One of the most notable examples is the Praktiker umbrella company, which filed for insolvency in 2013. Praktiker was one of Germany’s most recognizable sales divisions, generating around three billion euros in sales annually and employing about 20,000 people. The company was the third largest in the market, accounting for 12% of total sales. The bankruptcy left a noticeable hole in the industry. In 2016, Christoph Kilz and Dirk Oschmann acquired the rights to the name and opened a DIY online shop under praktiker.de, which is independent of the former Praktiker company. In this case, the brand survived the company. But the company did not survive the insolvency.
Why do Businesses in Manufacturing and Wholesale become Insolvent?
When we look at the German industrial wholesale market, we see a landscape where certain companies face the harsh reality of insolvency. These companies have found themselves unable to repay their debts to creditors and continue their operations.
The reasons for this can be varied, ranging from broader economic conditions, shifts in the market, and specific challenges within the company. It’s important to note that internal factors such as leadership changes and decision-making struggles can also play a role in financial difficulties. It’s crucial to understand the root causes to address them and move forward.
Besides Praktiker, another well-known example of a company that has recently filed for bankruptcy in the industrial wholesale segment in Germany is the book distributor KNV Group. Founded in 1825 and headquartered in Leipzig, KNV Group was one of the largest German book wholesalers and distributors.
Despite its long history and prestige as a reliable and reputable company, KNV filed for bankruptcy in 2019. The leading causes for KNV’s bankruptcy were the rapid decline of the traditional book market in Germany due to the rise of e-books and online retailers and the company’s heavy debt load.
B2B Wholesale & Distribution: Insolvency Examples in Germany
Another example is Wollschläger, a family-owned wholesaler until 2016. Its history began in 1937 in a garage in Danzig. Despite surviving World War II, the Berlin Wall, and the 2009 crisis, it could not withstand insolvency.
You can read our four-part story here.
When it comes to B2B wholesale companies, the road to insolvency can be a slippery slope. The rate at which a company reaches this point can depend on various factors, such as its financial stability before the crisis, the gravity of the economic challenges they’re facing, and the steps taken by management and stakeholders to rectify the situation.
As with any situation, being proactive is vital. And in this case, surviving B2B distributors and wholesalers stay ahead of the curve by embracing technology that can improve their bottom line. Innovation can include implementing e-commerce, dynamic pricing, or even artificial intelligence in sales. For B2B wholesalers in Germany, incorporating AI into their sales strategy is essential to avoid insolvency. Time is of the essence, and companies must now adapt and implement new technology and tactics to prevent future financial struggles.
Other Interesting Facts about failed Wholesalers and Manufacturers in Germany
Remember Eisenmann SE? Eisenmann was an internationally active equipment manufacturer and supplier to the automotive industry. The company had headquarters in Böblingen and representations in eleven countries across America, Europe, Russia and Asia. It was a family-owned business, with all shares in the hand of the four children of Sabine Eisenmann, the wife of Peter Eisenmann.
The sales engineer Eugen Eisenmann founded an engineering office to fabricate wood drying plants and later lacquering plants in 1951. At its peak, Eisenmann was a well-known and respected company in the industry, offering a wide range of products and services to customers in various sectors, including automotive, aerospace, and engineering. In 2008, Eisenmann employed 1450 people in Germany, 250 internationally and around 1100 in the operating companies. Its customers included Tesla and Lamborghini, and it had a turnover of about 860 million euros – 70 per cent of which it generated abroad.
As the clock ticked closer to Insolvency, Eisenmann SE engaged in intense negotiations with a state-owned Chinese engineering group. The company never struck a deal despite a generous purchase offer of 1 billion euros. Ultimately, the insolvency dismantled Eisenmann SE since no investor emerged to save the company. The legacy of the Eisenmann name lived on through Eisenmann GmbH, which continues to operate in some capacity.
Can B2B Wholesalers and Distributors survive Insolvency?
KNV Group, a German book wholesaler and distributor with a storied history dating back to 1825, fell victim to the same fate as Eisenmann. On 14 February 2019, the managing directors filed for insolvency with the Stuttgart District Court following failed negotiations with an investor.
Business operations continued, but the financial losses associated with the insolvency impacted 5,000 publishers who sold books through KNV. In June 2019, the company was given a new lease on life when logistics company Zeitfracht announced its takeover, retaining all locations and employees. The transition of ownership took place on 1 August 2019. The insolvency marked the end of the tenure for the previous sixth-generation managing partner, Oliver Voerster, and Bertram Feuerbacher, both direct descendants of the founding Volckmar family.
A confluence of external and internal forces brought on the collapse of KNV. Perhaps most significantly, the traditional book market in Germany was in a state of precipitous decline. With e-books and online retailers on the rise, brick-and-mortar bookstores were seeing fewer and fewer customers, and KNV’s revenue from book sales had been steadily declining for some time. This decline accelerated in the years leading up to the bankruptcy, dealing a severe blow to the company’s bottom line.
A recent positive example of a tradition-company being saved is the case of Ludwig Leuchten GmbH. The investor Fischer Group acquired the machines of the insolvent in an asset deal, and so rescued the company in February 2023.
Factors Contributing to the Insolvency: Debt Crisis, Internal Conflicts, the unavoidable Crash.
Another critical factor in KNV’s downfall was the heavy debt load the company had taken on in recent years. KNV had amassed substantial debt to fund investments and expansion, which was a significant burden. Ultimately, this debt proved too much for the company to bear and substantially contributed to the bankruptcy.
Finally, there were also internal issues at play. Internal conflicts, management changes, and difficulties in decision-making had plagued KNV. These internal problems made it difficult for the company to respond effectively to its challenges in the marketplace, and they ultimately added to the company’s woes.
During the bankruptcy process, KNV had to make difficult decisions, such as restructuring, cutting costs, and downsizing to stay afloat. Insolvency and restructuring a decades-old company are always painful. KNV was not the exception. Yet this process was necessary to ensure the company’s survival.
KNV’s bankruptcy is a cautionary tale for companies in the wholesale industry. The rise of e-books and online retailers has significantly impacted traditional brick-and-mortar bookstores and their suppliers. Regardless of their success, businesses that fail to adapt and evolve risk falling behind. But for those who do, there’s still an opportunity to survive and thrive.
You know the Germans: “Fachgroßhandels” do not Go Bankrupt, or do they?
Still, want more? Fachgroßhandel Kuss GmbH. The KUSS specialist wholesaler, long beset by financial difficulties, had finally found a way forward after reporting insolvency in 2013 and with 200 employees at risk.
After intensive negotiations with various investors, the company struck a deal to ensure its continued operation. Insolvency administrator Jens Lieser, who had previously restructured six of the insolvent companies of the KUSS Group into four new divisions, oversaw the transfer of parts of these divisions to three new investors, effective 1 January 2014. A management buy-out took over the hard goods division. It no longer exits.
The steel division, which a steel trader bought from Baden, retained the locations in Ramsbach-Baumbach and Altenkirchen, while a Rhineland-Palatinate company purchased the building services division.
None of the KUSS Group employees had to lose their jobs due to the restructuring, but some were unemployed later on. The new investors took some 90 employees from the operative units, while another 30 moved on to other competitors. The remaining employees received around 80% of their old salaries for five months while looking for employment.
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B2B Wholesale & Distribution: Reckoning Reality
The wholesale industrial sector in Germany is facing a significant shift as B2B e-commerce is rapidly changing the game. Traditional brick-and-mortar operations are feeling pressure, leading to increased bankruptcies.
E-commerce platforms and online marketplaces have made it easier for new players to enter the market, creating fierce competition for established B2B distributors. Competing with someone distributing with lower costs put companies with physical locations and experienced sales teams at a disadvantage, with many needing help to adapt.
For those wholesalers who haven’t fully embraced e-commerce and digitalization, the situation is particularly dire, as they face declining sales and margins. These companies need support navigating the new digital B2B sales landscape.
In conclusion, the number of bankruptcies in the industrial wholesale segment in Germany is on the rise. Businesses must stay aware of the risks and take steps to mitigate them to avoid insolvency.
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Further Read (german language):
Elektro Wirtschaft (2023): Positive Wendung beim insolventen Beleuchtungshersteller Ludwig Leuchten
Statistisches Bundesamt: Gewerbemeldungen und Insolvenzen
Anna Cooban, CNN Business (2022): Rocketing energy costs are savaging German industry.
Insolvenz Portal (2013): Investoren ermöglichen Neustart beim Fachgroßhandel KUSS
Lieser Rechtsanwälte (2013): Fachgroßhandel KUSS meldet Insolvenz an
Handelsblatt (2022): Das sind die spektakulärsten Firmenpleiten Deutschlands
Statista (2023): Anzahl der Unternehmen im Großhandel in Deutschland in den Jahren 2002 bis 2020